A company is considering buying either machine A or machine B for its business. The cost of
Question:
A company is considering buying either machine A or machine B for its business. The cost of machine A is $90,000 and that for machine B is $105,000. Both machine have a salvage value of zero at the end of their respective economic life (5 years for machine A and 4 years for machine B). Cash inflow from machine A is as follows; $20,000, $22,500, $31,000, $40,500 and $46,000 for year 1,2,3,4 and 5 respectively. Cash inflow from machine B is $30,000, $49,000, $50,500 and $35,000 for year 1, 2, 3 and 4 respectively. Machine B will require servicing in year 2 and 3, which will cost the company $7,000 per year for each of the serving years. Based on the annual worth criteria and interest rate of 15%, which machine would you recommend to the companyand at what annual worth